Incremental Value Of Blackberry's Arbitration Award Estimated At $1.54 Per Share

Shares of BlackBerry Ltd BBRY spiked 16.04 percent on Wednesday trading after the company announced it had been awarded $814.9 million in an arbitration against QUALCOMM, Inc. QCOM over royalty overpayments.

While the decision regarding the amount of the award is interim, it is also binding and non-appealable. This means Qualcomm will have to pay Blackberry no matter what — even though the former said it did not agree with the decision. However, the final figure is still to be determined, probably before the end of May.

Analyst's Commentary

In a report issued Wednesday, Imperial Capital analyst Michael Kim commented that while Blackberry’s financial position was already strong as of the end of February, he estimates the award could represent roughly $1.54 per share of incremental value and calculates the company’s pro forma net cash should hit $1.857 billion after the money comes in.

“Given the company’s significant liquidity, we believe management could accelerate strategic expansion and further strengthen its software and services portfolio,” the research note read. “We think management has largely integrated the company’s previous acquisitions, and we estimate BBRY will achieve revenue growth from software and services at the high end of management’s guidance of 13–15 percent in FY18.”

The firm’s analysts think Blackberry’s management could now focus on “higher growth opportunities such as embedded software, connected cars, and Internet-of-Things (IoT), given the company’s early leadership with its QNX business.”

Having said this, the analysts added that Qualcomm remains one of Blackberry’s main technology partners. In fact, the company said it envisions cooperation in automotive solutions and ASICs (application specific integrated circuits) security.

Imperial Capital maintains an In-Line rating and $8.25 price target on shares of Blackberry.

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